China looks set to turn to a tariff-proof sector as U.S. trade war bites: K-pop

Locked in a trade war with the United States and struggling with weak domestic consumption, China looks set to make a U-turn on an unlikely sector: K-pop.

It was announced on April 28 that K-pop group Epex will be performing in Fuzhou, Fujian province, on May 31 — the first time an all-Korean idol group has held a concert in mainland China since 2016.

On top of that, the large-scale annual Dream Concert — South Korea’s longest-running K-pop event — has reportedly been scheduled to take place on Sept. 26 at a 40,000-seat stadium in Hainan province, the Korea Entertainment Producers’ Association said on April 30.

Those developments could signal an easing of China’s unofficial ban on K-pop acts on the mainland after South Korea announced the deployment of the Terminal High Altitude Air Defense missile defense system in 2016, with China saying the system was aimed at constraining China’s power in the region, among other reasons.

The about-face on K-pop represents a “structural turning point” for the sector, according to Oh Jiwoo, research analyst at CGS International Securities Hong Kong.

Oh told CNBC “this policy shift is part of China’s broader strategy to revitalize domestic demand amid a prolonged consumption downturn.”

She noted that consumption contributed nearly 70% to China’s gross domestic product growth in 2018, but the share has dropped to below 30% in recent years, with the country’s consumer price index growth hovering near zero.

“In response, the government has started promoting cultural events—including foreign pop concerts—to stimulate discretionary spending in tourism, hospitality, and local commerce,” she added.

On April 25, China’s ministry of culture and tourism released a notice calling for the promotion of cultural events, including concerts and music festivals.

Oh pointed out that China is South Korea’s third-largest album export market after Japan and the U.S., and the second-biggest music market in Asia, “underscoring its strategic importance despite years of restrictions.”

Also helping the case for K-pop in China is the fact that the sector is seen as tariff-proof.

Shinhan Securities’ Ji In-hae wrote in a April 14 note that “although the market is very volatile due to the tariffs, [entertainment and media are] not affected by the tariffs at all, while the possibility of China’s opening is valid.”

CGS’ Oh said, “Core revenue drivers—streaming, concerts, and fan content—are digital and intangible, making them immune to cross-border tariffs.” Even if fans buy albums and merchandise, tariff exposure is “negligible,” given low unit prices and loyal fan demand.

“In contrast with semiconductors or autos, where global trade policy directly impacts supply chains and pricing, K-pop consumption is far less sensitive to protectionist measures,” she added. Semiconductors and automobiles are two of South Korea’s key exports.

Last month, South Korea announced a $23 billion support package for its semiconductor sector in light of uncertainty around U.S. tariffs. The Trump administration has imposed a 25% levy on all vehicles shipped to the United States, and another 25% on steel and aluminum imports.

South Korea’s Hyundai and Kia are among the top eight bestselling brands in the U.S, according to car marketplace Carpro. The country is also the fourth-largest exporter of steel to the U.S. in 2024, according to the International Trade Administration under the U.S. Commerce Department.

But China’s softening stance on K-pop has a diplomatic dimension that goes beyond the desire to increase domestic consumption, analysts say.

Citi analysts John Wu and Alicia Yap said in an April 4 note that China may seek to restore ties with neighboring countries, including South Korea, in light of its own economic challenges.

Cultural diplomacy could emerge as a key starting point, they said, leading to the easing of informal bans on South Korean content and resumption of K-pop’s fan-driven revenue streams in the region. The sector has been described by them as “a long-term beneficiary of [a] changing world order.”

CGS’ Oh echoes that view, telling CNBC that “the reintroduction of K-pop could help diversify cultural offerings and foster regional goodwill.”

She added China appears to be warming ties with South Korea while placing temporary limits on certain Western content, including Hollywood films.

Oh said the shift not only restores access to a previously restricted fan economy, but also presents an opportunity to deepen cultural engagement in Asia, which will lay the groundwork for longer-term structural growth in the region.

The developments could be good news for K-pop stocks.

The earnings and share price of K-pop’s four largest companies — known as the “Big Four” and all publicly listed — took a beating in 2024. That’s despite the legions of adoring fans, multi-city concerts and billions of YouTube streams seen worldwide.

But a rebound seems to be taking place in the first few months of 2025, with three of the Big Four companies registering substantial year-to-date increases.

China’s concert market would provide a substantial boost in 2025, should the country lift the unofficial ban on South Korean artistes. CGS’ Joshua Kim wrote in a Feb. 10 note that the Chinese concert market size increased from $2.9 billion in 2019 to $8 billion in 2024, growing 189% during the period.

“Hence, if China lifts the ban on Korean artistes, we expect China to account for more than 25% of concert revenue in 2025, exceeding the contribution in 2016,” he said.

Morgan Stanley equity analyst Seyon Park said she would consider a China reopening a “potentially powerful catalyst” that could drive earnings and fair value estimates significantly higher, though the reopening is likely to be gradual.

In Oh’s view, the approval for Epex’s concert is a “policy test case” that could pave the way for larger acts. She noted that smaller fan events by girl groups Twice and IVE in Shanghai could indicate China is starting with mid-tier acts, before progressing to broader re-engagement.

Epex is a relatively rookie group in the industry, having debuted in 2021, but Oh said that these are not isolated approvals, instead, they are a broader transition toward high-capacity, high-visibility events.

“With HYBE, JYP, SM, and YG already positioned for global arena tours, we expect Korean agencies to move quickly in monetizing demand once restrictions are fully lifted. These developments reinforce the case for a multi-phase reopening scenario and present a strong earnings catalyst for the Big Four,” she said.

Or to quote a 2009 song from YG Entertainment’s 2NE1, K-pop is telling China, “it’s been a long time coming, but we’re here now.”